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Chip company alleges iPhone maker shared confidential files with rival supplier Intel

By Tripp Mickle 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 26, 2018).

Qualcomm Inc. accused Apple Inc. of funneling proprietary information about the chip supplier's technology to rival Intel Corp., broadening a long-running legal battle between two companies central to the smartphone industry.

Apple engineers used its software and confidential files to help Intel engineers develop modem chips for iPhones, according to an amended complaint Qualcomm filed Tuesday in California's Superior Court in San Diego County.

Qualcomm, which is seeking unspecified damages, provided no evidence supporting its charges in the filing. It is asking the court for a jury trial where it said it would present evidence based in part on discovery it's already conducted.

An Apple spokesman referred to the company's past statement on Qualcomm's business practices, calling them illegal and harmful to the smartphone industry.

Intel, which isn't named as a defendant, declined to comment. Its modem chips were incorporated into iPhones in 2016, marking an end to a period of Qualcomm exclusivity as a supplier of that component.

The accusation of intellectual-property theft intensifies the feud between Apple and Qualcomm and lessens the likelihood of a settlement between the two in the near future. The longtime technology partners are locked in legal tussles over patent royalties and patent infringements in courts ranging from the U.S. to Germany.

That dispute has upended a partnership that dates back to 2010, when Qualcomm entered an agreement to begin supplying Apple with modem chips for iPhones and iPads. Apple first sued Qualcomm in January 2017 over the modem supplier's practice of collecting royalties on the entire sales price of an iPhone up to $400.

Qualcomm says it charges a percentage of an entire device because its patents -- essential to implementing cellular-communication standards -- relate to cellular devices as a whole, not just its chips.

Under terms of their previous partnership, Qualcomm said it agreed to provide Apple with techniques, methods and software to evaluate the performance of its modems in iPhones. Those agreements gave a limited number of Apple engineers access to sensitive information, and Qualcomm said it has evidence showing Apple provided some of that information to Intel around 2016 -- a time when it says the iPhone maker was seeking leverage in modem-chip negotiations.

"Apple has engaged in a yearslong campaign of false promises, stealth, and subterfuge designed to steal Qualcomm's confidential information," Qualcomm said in its filing.

The allegations are an amendment to a breach of contract suit Qualcomm filed last November. In it, Qualcomm accused Apple of violating an agreement that allows the chip supplier to audit the iPhone maker's use of its software. Qualcomm also said Apple engineers had shared some information about its technology with other Apple engineers working on competitors' chips.

In August, Apple challenged Qualcomm's suit in a filing, saying that after nine months of discovery the chip maker had failed to disclose evidence supporting those allegations. It asked the court to compel Qualcomm to disclose evidence.

Qualcomm's filing Tuesday expands on the chip supplier's prior claims by directly accusing Apple of using Qualcomm software to improve Intel's chip performance. It also says Intel engineers complained to Apple they weren't able to open Qualcomm files provided by the iPhone maker.

The latest legal volley from Qualcomm lands the same month as Apple announced new iPhones without Qualcomm modem chips. The iPhone XS and XS Max released last week rely on modem chips from Intel, according to iFixit, a site that evaluates the components in new devices.

The legal fight with Apple has hung over Qualcomm throughout a difficult period. The company fought off a takeover from Broadcom Inc. in March. It later abandoned its own planned takeover of NXP Semiconductors NV because it couldn't secure regulatory approval from China due to the trade battle with the U.S. Apple has withheld billions of dollars in payments as the royalty dispute marches on.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

September 26, 2018 02:47 ET (06:47 GMT)

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